Amec discusses the advancements of the ESG agenda in Brazil

Amec’s Technical Commission made a presentation about ESG principles and debated the topic in a meeting that had Ms. Maria Eugênia Buosi, founding partner of Consultoria Resultante, as a guest. With over 15 years of experience in the segment and a professional background that includes management positions at ABN-Amro and Santander, the specialist presented the background and the current scenario of social, environmental and governance principles in Brazil and across the world.

“It is a topic that has become more and more central to the management of risks by investors, not only as a parallel or institutional marketing agenda, but also in decision making and control of their portfolio’s risk,” Ms. Buosi said.
Search for standards
Mr. Fábio Coelho, Amec’s CEO, highlighted that the topic has become increasingly relevant in Brazil and across the world in different levels. In Europe, the topic is hotter and, an analysis of the advancements in the main European markets can provide important clues about the path to be followed in Brazil.
He stressed the importance of adopting more appropriate standards for the disclosure of information about the actions and policies of companies in the ESG sphere. Mr. Coelho remembered that a proposal was submitted to the government with this very objective. “We are waiting for an answer from the Ministry of Economy. We do not want to have to look for reference forms again and again to find related information,” said Mr. Coelho, who advocates for a specific regulation to deal with the problem. 
Ms. Buosi agrees that many corporate reports are aesthetically appealing, but when one looks for material information about social and environmental aspects, they lack appropriate data. The consultant advocates for the need of an improved qualification of the sustainability and marketing areas and more engagement of IR departments and CFOs to provide investors with more appropriate information. 
Timeline
To introduce the history of ESG principles in Brazil, Ms. Buosi presented a timeline showing the first social and environmental agenda created two decades ago and the milestones all over the world. She also talked about the creation of the first sustainability index, the Dow Jones Sustainability Index, in the end of the 90’s and about a milestone in Brazil: the launch of the Ethical Fund by Santander in 2001.
The specialist explained that the 2008 crisis was a setback for the advancement of the topic, exactly when the segment was taking off. With the current COVID-19 crisis, she expects the opposite and that the criteria are reinforced in investors’ analyses and decision-making processes.
Recent moves
The consultant explained that social issues have become more relevant with the pandemic, with a special focus on the analysis of the relationship between companies and their employees and suppliers. She also mentioned that, in the analysis of environmental criteria, the world’s main foreign assets have been giving greater importance to the recommendations of the TCFD – Task Force on Climate-Related Financial Disclosures. “The TCFD are the magical words that are permeating the discussions of the financial system. Banks are following these recommendations that will serve as an anchor for most companies in the market,” she said.
Ms. Buosi mentioned some interesting initiatives in the Brazilian market. One of them is the creation of CDP Brasil stock index, from the partnership of the British NGO CDP with Consultoria Resultante. The index is built based on questionnaires in line with the TCFD.
Investors’ posture
In addition to the regulatory advancements to demand more transparency in the disclosure of information, the engagement of investors is also important to improve ESG-related practices. The work developed by Norway’s sovereign funds, which excluded Brazilian companies from their portfolios after identifying environmental and governance problems, was one of the examples given by the specialist during her presentation.
In Brazil, she pointed out an example among pension funds: Funcesp, which started to adopt a more integrated analysis model for the decision making of investments in variable and fixed income and private equity portfolios. “It is important to fully incorporate the integration of criteria into the analyses of assets,” she stated.
The specialist also highlighted the importance of Amec’s engagement with the topic. Recently, the association formed a partnership with PRI – Principles of Responsible Investment – to act as a Network Supporter in Brazil (read more). “Investors play an important role in evaluating whether the companies’ ESG policies are really incorporated into their management,” she said.
Investors also play a relevant role when it comes to their engagement with the companies. “Another important strategy is to exercise voting rights based on the commitments with the invested strategy,” she commented. She explained that the active encouragement of the best social, environmental and governance practices generate value for the portfolio and for the development of the companies in the long term.